Goldman Sachs says its losses are ‘immaterial’ even as rivals warn of billion-dollar losses following Archegos liquidation

Goldman Sachs
Goldman Sachs reception in Sydney, Australia. REUTERS/David Gray/File Photo
  • Goldman on Monday said any loss it sustained following the Archegos stock-selling spree is likely immaterial, a source told Bloomberg.
  • The investment bank’s loans to Archegos were fully collateralized, the source said.
  • Goldman was also among the first to reduce its exposure, so exited most of its positions in relation to Archegos, the source added.
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Goldman Sachs Group on Monday assuaged client and investors concerns, telling them that any loss incurred following the billion-dollar stock selling spree of Archegos Capital Management is likely to be immaterial, a source told Bloomberg.

The investment bank’s loans to Archegos were fully collateralized, Goldman said. In addition, the New York-based investment bank said it was among the first to reduce its exposure and has therefore exited most of its positions in relation to Archegos, a source told Bloomberg.

This is in stark contrast to Nomura Holdings and Credit Suisse Group, which both said they are facing “significant” losses following Archegos’ unwinding of positions. Neither bank referred to Archegos by name in the warnings they individually issued investors on Monday.

In the same note, Credit Suisse added that the loss brought about by the Archegos fire sale will be material to the bank’s first-quarter earnings.

Archegos, founded by former Tiger Management trader Bill Hwang, is now at the epicenter of a bet that is roiling global markets. The US-based hedge fund manages the wealth of the billionaire, who like other alums of the legendary fund carries the honorary title of “Tiger Cub.”

It’s not Hwang’s first run-in with market irregularities, as he pleaded guilty to insider trading in 2012 but was not banned from the securities industry. As recently as 2018, Goldman perceived Hwang as a risk and refused to conduct any business with him, Bloomberg reported. But that did not last long.

On Friday, Hwang’s margin call forced liquidation of more than $US20 ($26) billion in shares. While block trading is a common practice in the stock market, what made the Friday incident unusual is the size of the deal, with some chunks exceeding $US1 ($1) billion. The trading erased up to $US35 ($46) billion in market valuation for a handful of stocks, notably including ViacomCBS.